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Value Closes The Gap On Growth

As the major averages break topside their respective 50-dmas – a positive in its own right – we are encouraged by the shift away from growth & defensives toward the down-and-out laggards in the value arena. It is too early to tell for certain if these are anything more than short-term countertrend moves, but for now the moves we are seeing give us reason for optimism — something that was running very low just one week ago.

  • Growth vs. Value changing of the guard? Across the market cap spectrum, YTD growth vs. value uptrends exhibit signs of reversing in favor of value.
  • 10Y/2Y Treasury spread; High yield spreads. The 10Y/2Y Treasury spread is no longer inverted and high yield spreads have narrowed to levels not seen since early August. Both say the same thing: fears of an imminent recession are becoming less likely.
  • Oil prices breaking out. WTI and Brent crude oil prices are quietly showing signs of potential breakouts topside their respective downtrends, something that would be a great sign for the prospect of improving global growth.
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